Rising bond yields, along with a possible U.S. Fed rate hike, have triggered global sentiment of risk aversion, leading to increased outflows of FII funds from India, Motilal Oswal Financial Services said.

According to the brokerage, $13.5 billion of FII outflows have taken place in secondary markets since October 2021. “Domestic equities have also borne the brunt of rich valuations after a relentless rally from bottoming in March 2020” , the brokerage said. . “While the Nifty-50 has only corrected 8% from its October 2021 peak so far, it is hiding stress in the broader markets.”

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In addition, he cited concerns over the cost of the “equity rally” which has had a brutal impact on high-growth tech stocks, with recently listed digital IPOs falling 25-50%. % of their recent highs. “The surge in crude oil prices to $90 a barrel has further worsened sentiment in India.”

Further, he said that with an ultra-accommodative monetary policy set to reverse course globally and in India, “we expect equity markets to remain volatile as they adjust to the cost higher of the capital environment”.

“This, in our view, would continue to test the costly valuation multiples that part of the market in question enjoys. rising interest rates would suppress the valuations of companies where positive cash flows have only been modeled in the distant future.”

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